What Is Cryptocurrency Mining And How To Mine Cryptocurrencies
Cryptocurrency mining is one of the three methods by which new coins are circulated. Cryptocurrency, the digital concept of currency and its exchange, came into existence in 2009 and has been popular till now. The very basic idea is that it works on an open software network where everyone with a computer and internet connectivity can run a copy of this programme, but no one computer has control over it.
Sounds intriguing? Read on to understand what crypto mining is and how to mine cryptocurrencies.
What Is Crypto Mining?
Crypto mining is the extensive process of verifying transactions and bringing new coins into circulation. This whole process is carried out by the users known as Cryptocurrency miners. Crypto miners verify each block, and upon confirmation, it is added to the blockchain- a public ledger which keeps all the records of the transactions. This is a circular process- the crypto miners manage and secure the blockchain, the blockchain grants the coins, and the coins give an incentive to the miners for maintaining and keeping the blockchain secure.
How to Start Mining Cryptocurrencies?
Anyone can be a crypto miner as the tools for the same are easily available. Go through the following steps to know how you can step your foot into the crypto universe:
Step 1: Among thousands of crypto coins, choose the one you want to mine. You have to specifically look for the coin which uses the Proof-of-Work mechanism.
Step 2: Get your mining equipment. If you are new to this system, you might want to use a profitability calculator to know how much you would be making on that particular currency. This calculator uses your information such as hash rate, power consumption per hour and cost per hour to compute the probable profit you will be earning.
Step 3: Set up your crypto wallet; this is most probably the easiest step in the whole process. A compatible wallet for your crypto is not hard to find, and maybe you will find some suitable suggestions on the website of that currency itself.
Step 4: Upon choosing the wallet, you have to set up an address where you will receive and store your currency safely. There are plenty of such wallets available, and they are free of cost.
Step 5: Set up your mining device. Download the software from the website of that cryptocurrency. Make sure to set up your mining device under proper cooling as the machines can heat up due to extensive power usage.
Step 6: Start mining, but experts recommend that you don’t do this solo, especially if you are a novice and the competition is high. Join a mining pool, and due to the combined efforts of all the pool members, it is more likely that you will get rewarded than doing it solo.
How to Mine Cryptocurrencies – 5 Methods
There is always an option to take it solo, but it can get hard sometimes. There are several other methods of cryptocurrency mining for you to choose from. They are as discussed below:
- CPU mining: This method utilises a system’s central processing unit, but it provides a minimal profit due to low mining power.
- GPU mining: Mining through this process involves one or more graphic cards, otherwise known as graphic processing units. This process can come across as quite costly to some.
- Mining pools: As the name suggests, in this process, a group of miners put their combined efforts and share the block rewards. As pool fees, they pay a nominal percentage of that block reward.
- ASIC mining: This method is used for one specific cryptocurrency and is done using an application-specific integrated circuit. It can be quite expensive to some but also provide a higher hash rate.
- Cloud mining: This method uses an intermediary company, and that company uses their own mining devices. There is usually a contract between the miner and the company, which always favours the latter.
Also Read: What Is Crypto Market Cap And Why Is It Important?
Is Cryptocurrency Mining Legal in India?
Cryptocurrency is a decentralised system. In India, crypto has not been authorised or regulated, but there is no ban on it either. The process can be carried out at the own risk of the miners. However, as per the latest updates, the government has mandated a 30% tax on the gains earned through crypto mining.
Also Read: How to Buy Cryptocurrency In India – A Step-By-Step Guide
Final Word
The concept of cryptocurrency came into existence in 2009. Still, the idea of digital asset exchange and storage is not very familiar to everyone. When it comes to India, even if the youngsters are readily accepting the new concept and think it has a brighter future ahead, the government thinks otherwise. Cryptocurrency mining has neither been illegal nor legal in India, and through the Union Budget 2022, there will be taxation on gains earned through digital assets.
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FAQs on Cryptocurrency Mining
Ans: As per the new regulations announced in Union Budget 2022 for digital assets, any income earned from virtual assets such as crypto and NFTs will be taxed at 30%.
Ans: No, you don’t need a permit to mine crypto in India. All you need are good equipment such as a crypto wallet, a powerful PC and mining software for that particular currency.
Ans: Blockchain wallets can be classified broadly into two types – hot wallets and cold wallets. Hot wallets are digital wallets through which one can transfer coins quickly. Cold wallets are also digital but offline wallets where one signs off and stores the transactions in different hardware.
Ans: Proof-of-Work is a decentralised mechanism. It works on the agreement of the members of a network who put together their efforts to solve a mathematical puzzle to secure the network. Crypto is decentralised. Hence it uses this mechanism to verify and add new blocks to the chain.
Ans: NFT or non-fungible tokens, as the name suggests, are not fungible, which means one cannot exchange them, unlike the cryptocurrency, which can be exchanged. NFTs are unique, and the asset they represent determines their value.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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